More than two months after the attack, NSW Police Commissioner Mal Lanyon on Tuesday said he no longer needed the powers of the public assembly restriction declaration in some areas of Sydney.
The decision comes a week after police violently broke up protests against the Australian visit of Israeli President Isaac Herzog, which included demonstrators being punched and pepper-sprayed by authorities.
The state's police watchdog is investigating after receiving a significant number of complaints alleging misconduct.
On Tuesday, the Law Enforcement Conduct Commission urged members of the public to upload any footage or photo evidence to aid its probe.
The investigation was launched after significant pressure from politicians and community leaders and widespread outrage over a group of Muslim worshippers forcibly dispersed by police while praying.
The visit of the Israeli president had driven the protest restrictions, Mr Lanyon said, as he urged the community to be calm.
"We had the visit of a head of state; I had significant concerns about the safety of the community in managing the visit of a head of state (and) the movement of Jewish Australians who were there," he said.
"I'm satisfied the conditions that led to the extension last time do not exist now, and I'm more than happy for (police) to work with protesters."
Under the new laws, the restrictions related to a particular terrorist attack cannot be reinstated once lifted.
Organisers of the February 9 rally are pressing on with a constitutional challenge in the NSW Court of Appeal to stop the laws from being used after a future terrorist attack.
"The police commissioner was explicit that these undemocratic powers were all about 'protecting' Herzog from 'significant animosity' and mass protest," the Palestine Action Group said.
"Protesters who had nowhere to go were pepper-sprayed, assaulted, injured and arrested by an out-of-control police force who thought they could act with impunity."
The laws were rushed through NSW parliament after the deadly December 14 Bondi shooting and gave the commissioner the ability to limit protests after a declared terrorist incident.
Mr Lanyon deployed his powers almost immediately, restricting protests across Sydney for two weeks from Christmas Eve.
The restrictions were later relaxed to cover areas that included most of the city centre and large parts of the eastern suburbs, including Bondi.
Mr Lanyon argued the first use of the laws had been a success.
He said no officers have been stood down due to alleged police brutality during the February 9 rally.
